ASK54:

Do you have a target net yield & have you invested in a property that falls below this?

This week on Ask Rob & Rob, Mike asks Rob & Rob…

Do you have a target net yield and have you invested in a property that falls below this?

This is a commonly asked question – basically ‘how good is good enough’. The answer is different for everyone as Rob D points out, as everyone has a different approach and attitude to risk. Rob D does say that neither himself nor Rob B uses net yield as a measure, preferring to favour looking at ROI, this takes into account using a mortgage and tells us after factoring in that mortgage, how hard an investment is working. Rob D bases everything on ROI, occasionally looking at gross yield to compare different properties that have similar costs. Rob D (greedily) aims to get an ROI of 10% and in typical Rob D fashion, hasn’t invested in a property that doesn’t hit this measure, though definitely doesn’t rule this out if the deal had the potential to make great capital growth or add value.

Rob B has relaxed his approach slightly in recent time, having formerly worked with a target of 10% as well. He will now accept 8% BUT only if this property needs zero work and is being handed over to Yellow Lettings to get let. That said, he has done deals in excess of 14%, and deals at less than 6% because whilst he does check out this measure, he wont necessarily be put off entirely if the ROI isn’t so high IF the deal is right in terms of capital growth.

Rob B adds a note of caution to remind us that ROI isn’t all it’s sometimes cracked up to be! If it is based on letting at the maximum market value, getting a great deal from your solicitor and the very best mortgage rate in the market then these things may well not happen!

Finally, Rob D suggests you don’t compare ROI with other investors too frequently as you don’t know what another person has allowed in the way of rent void periods, maintenance costs etc. So don’t get too hung up comparing your figures against someone else’s, just know that you are happy with them personally.

Do you have a property-related question for Rob & Rob? Whether you’re a first-time investor or a seasoned pro, you could feature on our next episode. Just call 013 808 00035 and leave a message with your name and question (normal UK call rates apply).Or if you prefer, click here to leave a recording via your computer instead.

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